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Russian e-commerce market presents significant business opportunities for those able to overcome its challenges
With 84.4 million internet users and 27 million online shoppers Russia is already the largest online community in Europe and growing rapidly. With a skyrocketing number of Internet users, but a still underdeveloped commercial environment, the opportunity to build a successful online selling business in Russia is huge. The biggest growth areas are mostly in the remote regions, where growth is 50% higher than in central cities.
Even amid a slowing economy, the country’s online shopping kept increasing at a double digit rate in 2013, making it the fastest expanding online retail market in Europe. Russian e-commerce revenues in 2013 exceeded $1bn. Similar to the US and Europe fashion and electronics and are amongst the top e-commerce sellers in Russia. The volume of online sales represents approximately 2.8% of total Russian retail sales, meaning 98% of the market is still to play for.
Barriers to enter the market are high, allowing local players to dominate. They include the need to make heavy investment in logistics, marketing and customer service. As Russia is the world’s largest country by landmass, spanning 11 time zones across two continents, selling online poses quite a logistical challenge. Deliveries are not possible to some regions, which serves as the main reason for a high bounce rate.
Payment methods are another serious consideration for companies venturing in to the Russian market, as many consumers remain suspicious of credit card and online payments. Additionally, unfamiliar for non-Russian companies might be the most popular local search engines and social media sites. A further new hurdle is the increased complexity in shipping, since new import laws were implemented in December 2013.
Companies who can recognize revenue opportunities and provide a higher level of service in the remote regions have the opportunity to rapidly increase their market share, as illustrated by the example of Ulmart – the largest and fastest growing Russian online retailer. The company has succeeded in developing a business model that is exceptionally well-suited to the Russian market and provides solutions to poor logistical infrastructure and the high cost of paying an external courier. This has allowed the company to quickly expand even into Russia’s distant regions, at a rate twice as fast as the whole e-commerce sector.
To find out more about the particularities of the Russian e-commerce market and Ulmart’s business model which humbles the logistic beast, take a look at our latest case study:
Ulmart – Hybrid retail format beats challenges of Russian market